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Don’t ignore the big squeeze on CO2

by Nigel Hastilow on 13.06.2010 13:21

If you’re in the know, you know. If you are not in the know, you really don’t want to know. Except of course that you may need to know on a need-to-know basis.

I am talking about the carbon reduction commitment – a scheme that will gradually squeeze the carbon out of the biggest 5,000 companies and other organisations in the country.

They must measure their CO2 emissions, purchase permission to keep on burning energy and gradually reduce it as the carbon credits issued by the Government shrinks.

If they do well in cutting their CO2 emissions, they get back not only what they paid to obtain their permits but a bonus. If they do badly, it will cost them money – not as much as their fuel bills, of course, but, even so, more money.

And if they fail to comply with the regulations in some way – and that can include simply not working out their fuel costs accurately in the first place – they could be in even more trouble.

They could be fined hundreds of thousands of pounds. They could be publicly humiliated. And they would fall hundreds of places in the “green” league tables which will come out every year.

These league tables should worry a lot of businesses, universities, councils, large accountancy firms and others because they will be ranked alongside your peers.

If an organisation gets overtaken by a major competitors, the “green” consumer could well be influenced in favour of one company over another.

And while everyone is already arguing that green league tables are not the be-all and end-all of a firm’s environmental friendliness, you can be sure that’s not how the media will portray it.

Look at the way they treat school league tables – educationalists can, and do, insist until they are blue in the face that there’s more to it than simply success in exams at 16 and 18.

That’s not how the media sees it and, even more importantly, that’s not how parents see it either. School league tables are just about the only objective measure of success available to consumers of education – and the same will apply to “green” tables as well.

If – and, admittedly, it’s a big if – consumers react to the league tables by taking their business to the greenest organisations, the longer-term consequences for those at the bottom of the league could be serious.

The alarming consequences of the Carbon Reduction Commitment became plain at an ICAEW seminar in Birmingham where speakers from KPMG, the Environment Agency and the Carbon Trust Standard looked at the threats and opportunities it posed.

Ben Wielgus, from KPMG, said trial runs with some of the firm’s clients revealed one university thought it was emitting one million tonnes of CO2 when the real figure was less than a tenth of that.

Another university failed to add in the emissions from its spin-off businesses and would have exposed itself to a fine of £360,000.

The private sector was better prepared than the public sector, he said. Many organisations left it to junior employees and were, as a result, exposing themselves to serious risk.

One client had 88 electricity meters which had not been read for five years. Another had more than 1,000 meters that went unread. Yet companies were under an obligation to make sure their returns under the CRC were accurate.

Down-sides of the scheme include the allegation that it is “anti-growth” because a business which expands will be unable to increase its energy use proportionately.

There are also loopholes, including the fact that even big organisations which do not have “mandatory half-hour meters” escape the strictures of the CRC.

Organisations which fall inside the scheme should all have received notification from the Environment Agency. They only have until the end of September to register.

The purchase of CO2 credits gets under way next April. The first league table is published in October 2011. It’s all a bit of a nightmare.

Of course, most of those affected know all about it and their preparations are well under way. KPMG reckons that, had the CO2 market been open for business, it would have made a £30,000 profit from its trading.

But there may well be hundreds of organisations – businesses, hospitals, universities and so on – which have not been paying attention. They should do so now, before it’s too late.

There’s another of these events on Wednesday 23 June, 08:00 - 11:30 at Chartered Accountants' Hall, London, Moorgate Place, EC2R 6EA. Click here for more information.